Only a sufficient housing supply will stop prices from soaring

Only a sufficient housing supply will stop prices from soaring Housing prices that soared in the first half of 2010 are gradually evening out.  It is very important to have a sufficient supply of housing to ensure that the housing market remains stable with no sudden price spikes, said Tony Vepsäläinen, President of OP-Pohjola Group Central Cooperative at OP-Pohjola Group's Housing Seminar on 8 August in Kuopio. When Finland's economy was at its gloomiest in autumn 2008, new housing construction froze. Builders were intimidated by the recession, whereas buyer's confidence in their personal finances returned quickly. At the same time, the record-low interest rates compensated for the economic jitters. Demand for housing has been high despite the recession. According to OP-Pohjola Group's housing barometer in March-April, 52 per cent of people considering to buy a home said that there were no or very few available that they found ideal. 63 per cent that the local prices were reasonable or cheap, so people were willing and able to buy, but there simple were not enough homes available. As demand has exceeded supply, home prices have been rising since spring 2009. During the second quarter of 2010, housing prices rose in the whole of Finland by 10 per cent and in the capital region by 14 per cent year on year. "The experiences during this recession ultimately prove that only a sufficient supply of housing can ensure a healthy market with no price spikes. The rate at which the prices are going up is now slowing," predicted Mr Vepsäläinen at the seminar, emphasising that a controlled and stable housing market is in the interest of all parties. Mr Vepsäläinen thinks there should be a stronger focus on new housing construction, which is indeed on the rise, but the number of new homes should be much higher than in recent times to prevent a rift between supply and demand. Have home buyers taken too much loan? Interest rates are still record-low, consumer confidence is high and cheap loans are available, so there is an ongoing public debate on whether households are taking too much loan. Mr Vepsäläinen said that thanks to the low interest rates, housing loans have actually been repaid at record rate. "Many decide to pay back their loans in equal monthly instalments, but now that interest rates are so low, the actual proportion of repaid principal is higher. Although interest rates have gone up moderately, mortgage interests still remain well below the long-term average." Both customers and the banks have realised how low the interest rates are and are prepared for an increase, and customers have in recent times taken out smaller loans with shorter repayment periods. OP-Pohjola Group's Housing Seminar OP-Pohjola Group's Housing Seminar is an annual event arranged in conjunction with Housing Fairs, with representatives invited from municipalities, builders and construction companies along with Group member bank customers to hear the latest news about housing issues. The Seminar was arranged for the ninth time this year. OP-Pohjola Group is the biggest mortgage provider in Finland with a market share of over 35 per cent and over 100 years of experience in providing finance for owner-occupied housing. For more information, please contact: Tony Vepsäläinen, President, OP-Pohjola Group Central Cooperative, tel.+358 (0)10 252 4020 Mikko Hyttinen, Senior Vice President, OP-Pohjola Group Central Cooperative, tel.+358 (0)50 555 3211 Email: OP-Pohjola Group is Finland's largest financial services group providing a unique range of banking, investment and insurance services. The Group has the mission of promoting the sustainable prosperity, well-being and security of its owner-members, customers and operating regions through its local presence. Its objective is to offer the best and most versatile package of loyal customer benefits on the market. OP-Pohjola Group consists of over 200 member cooperative banks and the Group's central institution, OP-Pohjola Group Central Cooperative, with its subsidiaries and closely-related companies, the largest of which is the listed company Pohjola Bank plc. [HUG#1436785] This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. All reproduction for further distribution is prohibited. Source: Pohjola Pankki Oyj via Thomson Reuters ONE